Capitalism is about profits but economic theory tells us price should equal the marginal cost which does not allow for any profit. It could be there is a contradiction between what we say we believe and the way we actually behave. Figuring this out may be a major step in understanding our economy.

Price should equal marginal cost, the cost of the last item produced, because profits will attract more producers into an industry until competition forces prices down to the marginal cost level. For this theory to work there must be perfect competition. Perfect competition requires easy entry into a business, a uniform product, that no participant in the market be large enough to influence prices by limiting sales or purchases and that all participants in the market have full knowledge of the market.

In perfect competition there are no profits because competition will force prices down to breakeven point.

This would be great for customers but producers, believing they have a right to profits want to restrict competition. As producers tend to have more power than consumers there are in our economy lots of restrictions on competition. There are many ways to restrict competition but probably the best is to get governments to pass legislation that interferes with the operation of a competitive market. Look at the four requirements for perfect competition in the second paragraph above for ideas how to restrict competition. Some of the legislation which interferes is patent and copyright, tariffs, subsidies and licensing.

An advantage of legislation restricting competition is that the state and its legal system can be used to enforce it.

Sometimes definitions can be fuzzy and most definitions of capitalism fit this. The definition of perfect competition (see second paragraph above) is more precise even if it appears unrealistic. We have jokes about economists making assumptions. It is not safe to assume that capitalism is perfect competition.

I think the perfect competition model is very useful in that it provides an ideal towards which we could be working. It provides guidance for policy even though there are lots of forces working against that policy.

Whatever name we apply to our way of organizing our economy, it is important to understand that it is based on governments passing legislation to restrict competition.

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Cover Notes

After my first family broke up I went to the University of British Columbia and did a degree in economics because I was intrigued by the way in which money is created and because I wanted to understand the dynamics of how we exchange goods and services.

I concluded economics is mostly about relationships and we should evaluate economic policies by how they contribute to good relationships.

We have two major economic problems with which we should be dealing. The first is that while we have lots of energy and mineral resources left on this planet, we have used up the most easily accessible. Those that are left require an excessive amount of energy to extract. The second major problem is that our so-called "market" economy is largely based on legislation which restricts competition and thus allows some people an unequal share of the agricultural surplus.

To deal with these problems we need to focus our economy on a policy of sharing in the same way that families and people in small-scale societies share their food. We also need a universal guaranteed income scheme AND a new way of creating money. This would be a tremendous transfer of decision-making power from governments and bankers to individuals.

In this book you will learn:

why the economic principles of marginal cost and the elasticity of the demand curve say it should be priced at 99 cents.

why relationships are an important part of economics.

what it takes to make a good relationship.

that our civilization is based upon a huge agricultural surplus which should be considered an inheritance to be shared equally by everyone.

how the financial and the physical aspects of the economy interact.

how money is created out of thin air and the problems this creates for our well being.

how we can finance a guaranteed annual income scheme.

how to become a part of the ten percent,

how not to become a slave.

The list of ebook stores from which you may download this book is at the top of the home page.

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